Charter Communications ‘productive negotiations’ with New York’s Public Service Commission have deteriorated.

On Monday, Charter Communications filed a Motion for Stay to block the regulator’s July order revoking Charter’s merger with Time Warner Cable and requiring the cable company to file an orderly exit plan with the state no later than Dec. 24.

“Discussions have, so far, not resulted in a settlement,” the company admitted in the legal filing.

Get Out of New York

Calling the order “draconian” and against the public interest, Charter all but accused the Commission of being petty for throwing the country’s second largest cable company out of the state over what it called “the Commission’s revisionist interpretation” of the agreement to expand cable broadband service to unserved parts of the state. It called the Commission unreasonable for not giving the company due process, setting an unreasonable deadline to formulate an exit from the state, and violating the company’s 1st Amendment rights.

“The Revocation Order imposes a draconian penalty on Charter’s New York operations, commanding Charter to undo a significant portion of a multi-billion dollar merger the Commission approved over two-and-a-half years ago and purporting to evict Charter from the State where Charter serves 3.1 million customers and has more than 11,000 employees,” the company’s lawyers argued. “To top it off, the Order, as extended, gives Charter only until December 24 to formulate an exit plan, and six months thereafter to accomplish the exit, timing that would (as the Commission knows) effectively insulate the Commission’s actions from any judicial review. The Commission’s actions reflect not reasoned decision-making directed to the public interest, but rather retaliation against Charter because Charter challenged the Commission by advocating for its good-faith reading of the expansion condition.”

“The Revocation Order is unprecedented in its scale and represents a unique and extremely unusual penalty that, to Charter’s knowledge, no other major cable or telecommunications provider has ever faced in New York,” the company added. “Merely developing an exit plan to meet the December 24, 2018 deadline would force Charter to divert significant resources from its business operations in order to explore what an exit plan might look like, if it is feasible at all. Already, business executives in various departments of Charter have had to take time away from overseeing the business in order to explain the impacts of the Revocation Order and expected impacts of any exit plan. Continuing to divert resources to such an effort, including the time of Charter’s management teams, will necessarily impact Charter’s ability to focus on its core operations.”

The 25-page attack on the Public Service Commission suggest negotiations have strained between the company and regulators, despite several deadline extensions and often-repeated claims from both sides that “productive negotiations” were underway. In a footnote, Charter attempts not to burn all of its bridges with the Commission, noting, “Charter is filing this petition to preserve its substantial and compelling legal rights. Nothing in this application is intended to foreclose the possibility of further discussions with the Commission to resolve this dispute without the need for judicial review.”

The company wants the Commission to stop the clock it imposed on Charter to get its affairs in order in preparation of leaving New York. It is requesting a stay that will drop the deadlines until the courts wrangle over what Charter is calling an “unprecedented and unlawful action.”

Scrambled Eggs

Charter argues the Commission has no right to insist on much of anything, because much of its business operation is unregulated and attempts to interfere with it would cause the company “clear and substantial irreparable harm,” and violate the company’s constitutional rights.

The harm from Charter’s actual departure from New York roughly seven months from now would itself be massive and irreparable, as there would be no way for Charter to restore its position by “re-entering” the State in a commercially reasonable way if Charter later prevailed on judicial review. The eggs here are scrambled—the merged companies’ national operations are fully integrated, and there is no obvious way to separate them. Any obligation to do so would require a massive commitment of time and resources—starting immediately—to navigate the complex business, legal, and regulatory requirements needed to implement the Commission’s order to unscramble the eggs. Moreover, the preparation of an exit plan would itself negatively impact Charter’s reputation with employees, customers, and suppliers in highly competitive markets and require Charter to expend substantial effort, resources, and money that could not be recovered if Charter ultimately prevails in challenging the Revocation Order.

The filing does not acknowledge that Charter was informed of the Commission’s decision in late July and that multiple deadlines have already been extended on the company’s behalf by regulators. Charter also does not mention there is a long history of cable companies separating, spinning off, selling, or trading parts of the business to other cable operators when business or regulatory conditions warrant. Several cable industry mergers have required spinoffs of certain cable properties which have been accomplished with little protest from the cable companies involved.

Charter also argues that the very idea New York’s PSC would demand the company leave the state is irreparably harming the company’s good reputation with its customers — a contention long in dispute with many of those customers and customer satisfaction surveys which have rated the company among the worst in the country. But that did not stop Charter’s attorneys from trying:

[…] The Revocation Order has negatively affected Charter’s reputation and goodwill, and will continue to do so unless stayed. The Revocation Order unfairly paints Charter as an irredeemable bad actor, and the Revocation Order’s unwarranted requirement that Charter exit the State within a matter of months has damaged Charter in the general public’s eye. Indeed, Charter’s goodwill was already harmed by the initial media attention the Revocation Order received, and this harm is likely to be exacerbated by the filing of an exit plan that will spur a second round of news stories and public speculation regarding the dispute.

Bad Faith

Charter claims the Commission changed the terms of the Merger Order after it was approved. In Charter’s view, the company’s expansion effort to reach unserved parts of New York State should include New York City, one of the most wired metropolitan areas in the United States. That the Commission took offense to Charter’s interpretation of the Merger Order should not mean the company should face the ultimate consequence — being asked to leave the state.

“The unprecedented revocation of the Commission’s approval of a merger that closed over two years ago is grossly disproportionate to any conduct at issue here,” Charter argues. “Although the parties dispute the meaning of the expansion condition in the merger order, the revocation of the merger approval serves no legitimate Commission interest when other remedies are available and when the Commission has no reason to doubt Charter’s readiness to comply with any authoritative judicial construction. Nor can the Commission’s unprecedented action be justified by any finding of “bad faith.” What the Commission inappropriately labels bad faith is simply Charter’s reasonable effort to challenge the Commission’s new interpretation, exhaust administrative remedies, and prepare its case for judicial review. There is no reasonable justification for the punishment the Commission imposed.”

Charter also takes issue with the way the Commission met and voted to throw the company out of New York, calling it “the paragon of procedural irregularity.”

“The Commission issued the ‘revocation’ penalty […] at a rump session of the Commission, without providing Charter with an opportunity to comment or present any argument on the availability of the remedy itself, or upon most of the grounds on which the penalty was predicated,” the company argued. “The Commission also denied the public—including Charter’s customer base, who would be required to switch to a new provider, and the local governments that are parties to Charter’s franchise agreements that the Order purports to vacate—an opportunity to comment on the unprecedented proposal to force Charter to exit New York.”

Charter Sets Its Own Deadline – Nov. 26

Charter expects the PSC to rule on its motion within a week of filing it, demanding a stay before the start of business on Monday, Nov. 26. If the company does not get what it wants, it will seek a stay from the Supreme Court in Albany County instead.

But the company also suggests the PSC is bluffing.

“The Commission is currently pursuing an action to enforce its interpretation of the Expansion Condition in the Supreme Court, suggesting that the Commission itself intends for the condition to remain in effect rather than for Charter to actually discontinue operations and leave the State,” the attorneys wrote. “And even if the Commission truly intended to revoke Charter’s merger approval and require it to leave New York, there is no reason the Commission needs Charter to do so—and to submit a plan to that effect—immediately, before Charter has had an opportunity to seek rehearing and obtain judicial review.”

Cable companies continue to dominate the U.S. broadband marketplace, and the gap between cable broadband and telephone company DSL continues to widen.

Leichtman Research Group reports the top seven cable companies together added 728,423 internet customers in the last three months, an increase of 35% over 2017. One of the biggest gainers was Comcast, which grew 363,000 subscribers during the third quarter. At the same time last year Comcast added 213,000 customers. Charter Spectrum grew by 308,000 customers in the third quarter, bolstered by speed upgrades in select areas and more aggressive promotions. At the same time in 2017, Spectrum added 285,000 customers.

Cable’s gains are phone company losses. AT&T, Frontier, CenturyLink, and Consolidated (formerly FairPoint) saw 159,974 customers disconnect service in the last three months. Phone company losses were buffered in part by government-funded rural broadband expansion campaigns, which typically introduce broadband service in rural areas for the first time. Where customers have a choice, they are increasingly choosing cable companies to supply internet service because speed and reliability are often better, especially compared to DSL service still prevalent in a lot of areas.

Sources: The Companies and Leichtman Research Group, Inc.

*LRG estimate
^CenturyLink only reported residential subscribers in 3Q 2018.  LRG estimate including non-residential subscribers
^^Consolidated includes a minor sale of a local exchange carrier
^^^Cincinnati Bell does not include the acquisition of Hawaiian Telecom
Company subscriber counts may not solely represent residential households. Top cable and telephone companies represent approximately 95% of all subscribers.

Cord-cutting is taking an increasing toll on pay TV companies as 1.2 million customers canceled their accounts in the last three months, according to industry research firm Kagan.

At least 367,000 customers said goodbye to satellite TV company Dish in the third quarter. DirecTV lost more than 300,000 customers, delivering the worst quarter on record for satellite television since the services launched. Combined, more than 726,000 customers removed their satellite dishes in the last three months.

Cable companies have lost almost 1.1 million TV customers so far this year. Telco TV companies reported losses of about 94,000 customers, mostly as a result of 63,000 Verizon customers pulling the plug.

As competition for streaming TV services continues to heat up, some companies have seen their growth slow. Dish’s Sling TV and AT&T’s DirecTV Now were among the worst impacted, the latter likely the result of rate hikes in 2018.

Hulu with Live TV, YouTube TV and PlayStation Vue were all reported up by Kagan, picking up subscribers looking for cheaper and smaller television packages.

The residential pay TV penetration rate stood at 76.2% as of Sept. 30, which includes traditional cable, satellite, and streaming paid television services.

Ralph Romano is still on hold with Charter Spectrum, waiting to report an outage that began late Sunday evening in his apartment in the Jamaica, Queens neighborhood.

“You sit on hold for an hour and then the call disconnects, which is exactly the kind of treatment you know you are going to get from this shabby operation,” an angry Romano tells Stop the Cap! “I am 72 years old and ran my own business for 46 years. If I treated my customers the way this cable company does, I would have been out of business in 4-6 months. I don’t know how they did it but Spectrum is even worse than Time Warner Cable.”

Romano is one of dozens of customers reportedly experiencing a multi-day outage in Queens. For some, the outage takes out phone, internet and television service but for others, internet service is the worst affected.

Romano’s neighbor gave up on wasting her cell phone minutes on hold to report the outage. She took a taxi to the Spectrum Store in Elmhurst and then waited over 90 minutes before someone called on her.

NYC rats are not to be trifled with. This one is taking a slice home on the subway.

“I just wanted to report the outage, not turn in equipment or pay a bill, but the door greeter could care less,” Sandra e-mailed us. “They want your name and then they can’t be bothered. I watched people come in after me get called up to pay their bill, sometimes with a sack of change spilled out on the table that took 15 minutes to count. It was infuriating. When they finally called me, I was helped by Mr. ‘I Don’t Care’ who wanted my account information, then said my cable box appeared to be fine. He never tested the internet modem, which is where the problem was. When I told him the whole building was out, he said he couldn’t take reports about other people and they would have to come down themselves to report the trouble. He gave me a $5 credit for service we still don’t have back. Useless.”

“We have a lot of elderly people in this building so they are not going to run down to Spectrum and wait for hours to report a problem that could be discussed over the phone,” Romano said.

Like several other buildings in Queens, there are no immediate alternatives. Although Verizon claims FiOS is available to the building where Romano lives, the only neighbor who ordered it waited two months for engineering work and then had his order summarily canceled without explanation. The building owner warned FiOS is not available because Verizon was unwilling to place its incoming cables in the appropriate conduit, which is rat-resistant.

“The rats, which can be fend off by companies like pest control green bay, around here eat anything, especially cables,” Romano said. “Everyone seems to know that except Verizon.”

Over in Kew Gardens, intermittent internet access from Spectrum is often a fact of life.

Espinal

“When it rains, the internet is gone,” says Ana López. “You might get 15 minutes worth of use, but then the cable modem light starts blinking and the service is just gone. We have called them at least 10 times, and the riff-raff they send out here couldn’t find their rear end with their hands. Since the strike, the people who knew what they were doing must be on the picket lines because the guys taking their place are scary stupid. One suddenly decided to replace some inside wiring, but he ended up ripping the cable out of the wall by mistake and tore up the plaster. One thing they did make sure to do was laugh when they cut the old Verizon (FiOS) cable the old tenants must have used and then let it fall inside the wall. The other guy accidentally dropped one of his tools into my aquarium.”

López has repeatedly told them the problem has to be outside because it does not rain inside her home, but the latest contractor she dealt with confided he doesn’t climb poles unless absolutely necessary because “he is afraid of heights. ¡Dios mío! I am not lying to you.”

Unsurprisingly, the technicians did not fix the problem. As the problems in Queens mount, Rafael Espinal, chairman of the Committee on Consumer Affairs and Business Licensing in the New York City Council, has set up his own website to take complaints about Charter Spectrum across the city. “FixMyCableNow.com” does not appear to forward complaints on to Spectrum, but angry and dissatisfied customers can get more responsive service for unresolved problems by filing an online complaint with the N.Y. Attorney General’s office.

Ceylon City Council Member John Gibeau shows this Frontier Communications cable intentionally laid across the customer’s propane tank. (Image courtesy: Mark Steil, MPR News)

Frontier Communications technicians decided it would be perfectly safe to drape their telephone lines on top of a propane tank, use overhead tree branches as makeshift telephone poles, and leave phone cables laying on the ground — in lawns, fields, and farms — for up to three years in southern Minnesota.

Minnesota Public Radio found a number of problems with Frontier Communications in a special report outlining years of complaints about the phone company’s performance — or lack thereof — in small communities around the state, including in the town of Ceylon in Martin County, located along the Minnesota-Iowa border.

John Gibeau, a city council member, might tell visitors to be careful of Frontier’s phone cables, some that have laid on the ground in parts of town for years.

“There’s three lines there, that are just laying across the ground,” Gibeau told MPR News. “And they run down for probably another 60 yards.”

Frontier laid out the phone cables sometime ago, but they have never seen a day attached to a utility pole.

In another part of town, a Frontier line technician thought nothing about draping a phone line across the top of a homeowner’s propane tank. At one address, there was no convenient utility pole in sight, so the technician used a few trees in the neighborhood as makeshift poles, distributing the line through the tree branches which help keep the cable above ground so vehicles do not drive over it. Gibeau said Frontier has left it that way for almost three years.

Ceylon, Minn.

Another resident deals with Frontier’s phone line each time he mows his lawn. That is because Frontier just dropped the cable on the grass and left it there. He relocated it to a nearby flower bed to avoid an accidental entanglement with the lawnmower. Other neighbors have done their part, attaching Frontier’s lines to the top of fences and fence poles — anything in sight that can get the cable off the ground where it can be ruined over time.

In all these cases, Frontier has refused to fix the problems, despite repeated calls. But that may be asking for too much. At a hearing recently in Slayton, Frontier customer Dale Burkhardt lost his phone and DSL service after a construction crew accidentally severed the phone cable that serves his farm. More than a year later, Frontier’s repair crews have never shown up to repair the line, regardless of the number of trouble tickets and calls to customer service.

“I still don’t have a landline, I don’t have an internet,” Burkhardt said. “I’m getting a little fed up.”

As Minnesota’s Public Utilities Commission continues a series of public hearings around the state to hear complaints concerning Frontier Communications, regulators are getting an earful. Nearly 400 people have turned out for the hearings so far. Many report Frontier has not fixed their problems, no matter how often customers complain.

Javier Mendoza, Frontier’s vice president of communications, told MPR the company is listening to customers.

“For us, one customer who is out of service is one customer too many,” Mendoza said. “So, we would thank our customers for their patience. We recognize that from time to time we experience service issues and delays. And for those customers that are affected, we apologize to them.”

Frontier Communications scatters its phone cables on residents’ lawns, across a propane tank, and through tree branches as makeshift utility poles, reports Minnesota Public Radio (3:56)